VAT on online shopping likely to go

Al Amin :
Value-Added Tax (VAT) on online shopping is likely to be exempted in the upcoming budget for 2023-24 to encourage the sector.

The National Board of Revenue (NBR) will also incorporate provision in the budget in order to define online market and retail market to keep the entrepreneurs of the rising sector hassle-free, officials said.

Earlier, the E-Commerce Association of Bangladesh (E-CAB) proposed for keeping the e-commerce sector out of tax for next ten years and reducing the existing 15 per cent VAT on supply of goods to 5 per cent to flourish the business through digital platform.

The association also proposed for exempting the existing 15 per cent VAT on rents of offices and warehouses used by the e-commerce companies.

Currently, 5 per cent VAT is applicable for the commissions and fees charged by the e-commerce agencies through the online shopping, although they don’t sell any goods or service. They only create relationship between customers and retailers.

Besides, in some cases, the entrepreneurs of the e-commerce sector faced harassment by the NBR officials due to the lack of classification of digital market and retail market. Resulting, the local and foreign entrepreneurs are not encouraging to invest in the sector, the businesses said.

Trading through using the digital platform is steadily growing in the country, especially, in the post-Covid-19 period and there huge opportunity here.

The market size of the e-commerce in the country increased by 25 per cent to around Tk 22,000 crore in last year from Tk 16,000 crore in 2021, according to E-CAB.

The market size may cross Tk 30,000 crore by 2030, the entrepreneurs of the E-CAB opined.

Talking to The New Nation, Fahim Mashroor, CEO and co-founder of bdjobs.com, said, “As per the existing rules, the e-commerce companies are paying VAT, although they create relationship between buyers and sellers through their digital platform. So, if the government exempts VAT on online selling, the sector will be encouraged.”

He further said, “There is a 15 per cent VAT on delivery charges, which makes delivery expensive and puts more stress on customers. So, it should be reduced to 5 per cent with a view to popularizing the online shopping.”

“Some countries exempt tax on e-commerce businesses. But imposing tax on the income of the e-commerce organisations in Bangladesh made it difficult to reach our goal,” he added.

After selling goods, the e-commerce firms will pay the tax as a VAT on the transaction of their services, as per the existing rules.